Hello Everyone ,
How many times have we ,The sesame people used McDonalds as our business reference.
For, "What do you do?Sesame , you mean Oil ? " the "Oh , you know those small pearly seeds on top of McDonald burgers" always worked.
I didn't even know they made a movie about them till a few days ago. "The Founder" , if you've not seen it I suggest you do ,It's not everyday that they make a movie based on Food Entrepreneurs.
What really caught my fancy was the sales pitch of Ray Kroc,the man who made McDonalds famous
“Increase supply and demand follows” .
How true is that , all these years we've been taught otherwise, while the market leaders always saw it differently.
For years we concentrated on the Micro economics of our trade and ignored the Macros. The world demand and consumption doubled over the past decade and so did the production. China at the moment is Importing around 10,00,000 MT plus apart from its own production. I read online that their per capita consumption is about 1.1 Kg/Person annually ( the numbers add up too ). Convert China number into oil and consumption number is about 500 ml/Person per year. Half a Liter per year thats it , thats average 1 bottle per household per year.
AS PER FAO AND WHO, INDIA’S PER CAPITA TOTAL FAT CONSUMPTION IS 45–50 GRAMS PER DAY PER PERSON (18 Its per Year )WHICH IS MUCH BELOW THE AMOUNTS CONSUMED BY WESTERN COUNTRIES (100–150 GRAMS PER DAY PER PERSON, (35 Itr per Year).
AS PER FAO AND WHO, INDIA’S PER CAPITA TOTAL FAT CONSUMPTION IS 45–50 GRAMS PER DAY PER PERSON (18 Its per Year )WHICH IS MUCH BELOW THE AMOUNTS CONSUMED BY WESTERN COUNTRIES (100–150 GRAMS PER DAY PER PERSON, (35 Itr per Year).
Agreed these are all Oil seeds put together and one oil cannot replace the entire food chain but look at the numbers we have here , Imagine the scale and scope for growth. Our industry could grow two folds in matter of years without even making an effort.In India the sesame consumption I assume would barely be few hundred Grams per year per person.
“We really don't seem to understand what exponential means. Things move slowly at first and then curves up amazingly” It’s all about the supply side. African nations increased their supply and china kept buying more and more,a whole consumption pattern was created with increased supply chain. Hope the Indian Domestic market catches up soon, if anyone has ideas please feel free to share and discuss.The future looks bright.
Anyways thats all general chit chat, lets move to things that concern us in short term.
Korean Tender, Carry over stocks and the New crop 2018.
Korean Tender 16th July 2018 :-
India as usual got the bigger share , the total bids for 10,000 MT were about 19,000 MT. The bids usually are not a indicator of stock in hand as people sometime double bid the same quantities at different prices and some short bid as well. Overall I think this was a well covered Tender since the price movements were already factored in. As soon as the dates finalized the prices started to move up and people averaged their purchases, this should have given the bidders a fair leverage to take home the profits with the volumes that were on offer.
Koreans most probably should be out with 1 or 2 tenders more as they still need about 15,000 MT more to cover their 2018 buying quota. The timings would be critical though.I doubt they can wait till November so if they are in the market before it would clash with peaked domestic demand due to Diwali Festival and limited arrivals as sowing has been a little late overall. A tricky situation indeed.
Carry Over Stocks :-
For donkey years we have been crying wolf about the carry over stocks but no one ever has been able to judge the depth and size of the stock pockets. The cargo keeps flowing and flowing and flowing. This year however for the first time I've realized that stocks indeed are at all time low. Yes people are still holding on to little quantities here and there in anticipation of another rally but the volumes are pretty evident.Material is available but it has a clear price tag to it , days of distress sale are over.The stock now is in financially strong hands, since most of the commodities were down all year people booked profits at every levels they could .
The forward trade that happened rampantly was based on these old carry overs , someone holding 100 MT could speculate to sell 200 MT new crop forward since he knew he had something to fall back on if anything drastic happened , its was a physical hedging done at market yard level based on which the exporters could then do the same thing and offer forward into new crop with the seeds still in farms. This chain I think this year would be hard to maintain , of course there would be some daredevils who would speculate openly but thats a gamble which only a few can manage.Its a head/tail kind of deal between the supplier and the buyer and one of those two is sure to loose.
The road ahead for atleast 2 months , I'm saying 2 because by 30th Sept even though the arrivals may be huge, the crop news will be an open secret and will leave little chance for the stocks to make any real big impact , but for the next 60 days the stocks are the market movers for sure.I have a feeling that we will see atleast 20 days of Upward trend and a few days of stable + downward trend in this period. The stable and downward would be mostly slow demand driven while the UP days would be actual demand or speculation driven. With the tender out of the way we still have the hulled demand which continues. Going by the past numbers we would need about 20-25,000 MT per month at bare minimum for exports i.e about 40-50,000 MT till Sept 30th to be physically processed and moved out.
At the moment almost every sane exporter will have a little plus stock, the levels could vary as to when they actually bought it, like I said above, profit booking happened at all levels so the low level stocks are mostly accounted for and most of the cargo in hand will be of a fairly higher average. That means we are almost in the zone of back to back pricing which leaves little scope for under cutting and price competition at large scale.Some buyers who supported their suppliers all year round with consistent orders are sure to be the best beneficiaries, they would get the best deals possible which would further enable them to out-price their competitors in the longer run.
Carryover/Port Stocks at China is also a major factor, everyone keeps a track of that like they do of his own warehouses. So they should too, it definetly gives a fair idea about the consumption as well as the Import arrival pattern of China. However it is fairly difficult to judge the impact based on its volume , sometimes the port stocks may go down below 100,000 MT and yet the market doesn't move and sometimes its above 150,000 MT and we still see the China buying aggressively.
What's interesting is the timing of "Stock Price" viz a viz "Current Purchase Prices"
at Origin. For a consuming platform like China it is inevitable that they will have huge stockpiles of cargo all the time , its just plain volume business. Some Importers in China probably move more FCL's on a day than the number of Sesame Pallets an average European/American company in a business day. Thats the scale I'm talking about.
Simple business sense tells us that if the stocks at of low levels at consumer end it is better that at Origin prices are high, it helps move the stocks faster and at better levels , while if the stocks are of High levels the low/stable prices at Origin are better because it helps in rolling over the stocks with a better average price.
Right now after a long long time the stocks in China are all relatively low price levels , which means its better for them if the origins stay firm .They can move stocks quicker and with better margins while slowly bringing the market prices up to a levels where they can again cover at current levels. The cycle keeps repeating itself over and over again both ways.
The winter origins of China purchase like Ethiopia, Nigeria , Sudan , Burkina , Mali etc are all rumored to have little stocks, the only origin where crop was harvested recently was Indian Summer crop , Tanzania and Mozambique.
Indian summer crop got cleaned up faster than it arrived as prices were attractive , Chinese buyers knew about certain quality and quantity problems with Tanzania/Mozambique and Indian exporters were eager for volumes. Worked well for both I would say , after a long long time we saw back to back business happening smoothly and with mutual benefit.
Talking about carry overs and stocks at other destinations I would assume there isn't much anywhere. In a dull market (Period of Jan'18-May-18) I doubt anyone was speculating on a big rush and was hoarding sesame. Yes there could be a few but thats definitely not a reflection of the whole market. Most people were back to back and now have a chance to sell at a fair price.
The Season ahead :-
Like I said above prices being high at Origin has its own advantage and disadvantage. The good thing is that goods at destination move faster the bad thing is that orders for the Origin slow down. Everyone wants to first book their profit , watch carefully and then enter. Everyone is looking for sweet deals.
India over the years has become a reluctant seller. Everyone wants to double their investments in 1 seasons cycle. This is the reason that even a increase of about 40% from the seasons low seems small to the stockiest.The Indian story starts and ends with less sowing more rainfall , sometimes I get a feeling that people here actually pray for less crop concentrating on profits to be made on their stocks rather than focusing on the bigger picture of world demand/supply.If you argue in India about a huge crop the chances are you will be countered negatively, strange but true.
The sowing as I have always maintained varies to a limited extent depending on farmers preference and commodity prices.Usually sesame sowing areas are not feasible for a variety of crops but the farmers as we know are amazing people , if they get to it they can do the impossible.In recent times we did see the Sesame sowing area stagnate or reduce due to better prices of pulses but with reversed trends we are hopeful that has changed this year.Sporadic rains continue to be a mystery as it can change the volumes drastically within weeks. Till last weeks the areas that were almost dry are now water logged , paddy and other Kharif crops have that advantage of late sowing and late harvest which sesame doesn't.Rarely have we seen Re-sowing of sesame once the initial sowing fails.
However I am hoping this year of a better harvest than previous years , putting a number right now would be shooting in the dark.
The carry overs as we discussed are at bare minimum , the carryovers give a physical hedge every year for forward trade as well as stabilizing the markets for sudden demands such as " Indian Domestic sales for Winters". The short bursts of demands are controlled and catered by stocks in hand, with nothing to fall back on the new crop 2018 will always be under pressure.
There is another Korean Tender rumored before September . A tender before new crop would for sure empty the exporters as unlike local stockiest they would not be carrying Natural Sesame stock into the new season. The would mean almost everyone would be in to cover stocks for new season from Day 1 .
The "Bengal Double Skin" Hulled which has been a controversial product over the years but has evolved beautifully to cover the "Low Priced" but "Good Looking Seed" markets with no real concern for food safety or taste will take a hit this season. The bengal crop was stated to be less by about 30% which means the excess quantity they had to offer to the hulling units is gone and their prices up. The oil industry had first rights to this double skin quality and it has started to show already with prices rising quickly. This means a lot of factories will shift back to white sesame raw material ,volumes could be as high as 40-50,000 MT Annually ,the low priced cargos will not be available readily means at destinations everyone to have level playing field.
By the time we finish this season and merge into the new 2018 crop we could be closer to levels not seen in a long time, low priced stocks at destinations would have finished and the markets adjusted to new levels. Most commodity traders would agree that when we switch the season on a higher level the price volatility is that much bigger but a crash is highly unlikely because that would mean the whole trade to loose money. Its alright if it happens the other way around when markets open at the bottom and remain their but a crash from high's to low's takes more than just demand to bring it down.
Slow demand at best can keep the markets stagnant or trigger small corrections but a overall bullish sentiment usually prevails , at-least until we reach the top line.
For the season ahead ,Top line in my estimate for good quality Natural Sesame 99/1/1 type is USD 1850-1950 PMT and USD 2400-2500 PMT for good quality Hulled Sesame . Bottom lines should be USD 1250-1350 PMT and USD 1650-1750 respectively.
Natural above $2000 and Hulled above $2500 is a possibility but the exit windows will be too narrow at any given time.
Factors for Top Line :-
1:- Low Stocks and empty warehouses.
2:- Relatively less new crops compared to previous years in India,China ,Myanmar & Africa.
3:- Good domestic demand in India.
4:- USD movements against currency of Exporting countries.
5:- Triggers like general bullish sentiments and stock situation at Chinese ports.
Factors for Bottom Line :-
1:- A relatively huge crop as compared to previous years at all origins.
2:- Less stocking due to high prices.
3:- Back to back business resulting in stagnant and spread consumption patterns.
4:- USD movements against currency of Exporting countries.
5:- Chinese port stocks replenished periodically or huge inventory built up.
To sum up we have a feeling it is going to be a good year both in terms of prices and movement of goods. The Sesame market has matured tremendously over the years , the supply/demand lines well identified.What goes where , who buys what , what is available when, are all chalked out. The smaller things can create nuisance for a while but in a larger prospective China remains the KING,Africa remains the volume supplier and India remains the trusted supplier of Hulled, Sortex Sesame , market information and Gossips.
Please feel free to comment/correct/share just refrain from passing this as your own report.Giving due credit is important.
Regards
Mukul Gupta
Director
Shakumbhri Expo Impo Ltd.
India.
Anyways thats all general chit chat, lets move to things that concern us in short term.
Korean Tender, Carry over stocks and the New crop 2018.
Korean Tender 16th July 2018 :-
India as usual got the bigger share , the total bids for 10,000 MT were about 19,000 MT. The bids usually are not a indicator of stock in hand as people sometime double bid the same quantities at different prices and some short bid as well. Overall I think this was a well covered Tender since the price movements were already factored in. As soon as the dates finalized the prices started to move up and people averaged their purchases, this should have given the bidders a fair leverage to take home the profits with the volumes that were on offer.
Koreans most probably should be out with 1 or 2 tenders more as they still need about 15,000 MT more to cover their 2018 buying quota. The timings would be critical though.I doubt they can wait till November so if they are in the market before it would clash with peaked domestic demand due to Diwali Festival and limited arrivals as sowing has been a little late overall. A tricky situation indeed.
Carry Over Stocks :-
For donkey years we have been crying wolf about the carry over stocks but no one ever has been able to judge the depth and size of the stock pockets. The cargo keeps flowing and flowing and flowing. This year however for the first time I've realized that stocks indeed are at all time low. Yes people are still holding on to little quantities here and there in anticipation of another rally but the volumes are pretty evident.Material is available but it has a clear price tag to it , days of distress sale are over.The stock now is in financially strong hands, since most of the commodities were down all year people booked profits at every levels they could .
The forward trade that happened rampantly was based on these old carry overs , someone holding 100 MT could speculate to sell 200 MT new crop forward since he knew he had something to fall back on if anything drastic happened , its was a physical hedging done at market yard level based on which the exporters could then do the same thing and offer forward into new crop with the seeds still in farms. This chain I think this year would be hard to maintain , of course there would be some daredevils who would speculate openly but thats a gamble which only a few can manage.Its a head/tail kind of deal between the supplier and the buyer and one of those two is sure to loose.
The road ahead for atleast 2 months , I'm saying 2 because by 30th Sept even though the arrivals may be huge, the crop news will be an open secret and will leave little chance for the stocks to make any real big impact , but for the next 60 days the stocks are the market movers for sure.I have a feeling that we will see atleast 20 days of Upward trend and a few days of stable + downward trend in this period. The stable and downward would be mostly slow demand driven while the UP days would be actual demand or speculation driven. With the tender out of the way we still have the hulled demand which continues. Going by the past numbers we would need about 20-25,000 MT per month at bare minimum for exports i.e about 40-50,000 MT till Sept 30th to be physically processed and moved out.
At the moment almost every sane exporter will have a little plus stock, the levels could vary as to when they actually bought it, like I said above, profit booking happened at all levels so the low level stocks are mostly accounted for and most of the cargo in hand will be of a fairly higher average. That means we are almost in the zone of back to back pricing which leaves little scope for under cutting and price competition at large scale.Some buyers who supported their suppliers all year round with consistent orders are sure to be the best beneficiaries, they would get the best deals possible which would further enable them to out-price their competitors in the longer run.
Carryover/Port Stocks at China is also a major factor, everyone keeps a track of that like they do of his own warehouses. So they should too, it definetly gives a fair idea about the consumption as well as the Import arrival pattern of China. However it is fairly difficult to judge the impact based on its volume , sometimes the port stocks may go down below 100,000 MT and yet the market doesn't move and sometimes its above 150,000 MT and we still see the China buying aggressively.
What's interesting is the timing of "Stock Price" viz a viz "Current Purchase Prices"
at Origin. For a consuming platform like China it is inevitable that they will have huge stockpiles of cargo all the time , its just plain volume business. Some Importers in China probably move more FCL's on a day than the number of Sesame Pallets an average European/American company in a business day. Thats the scale I'm talking about.
Simple business sense tells us that if the stocks at of low levels at consumer end it is better that at Origin prices are high, it helps move the stocks faster and at better levels , while if the stocks are of High levels the low/stable prices at Origin are better because it helps in rolling over the stocks with a better average price.
Right now after a long long time the stocks in China are all relatively low price levels , which means its better for them if the origins stay firm .They can move stocks quicker and with better margins while slowly bringing the market prices up to a levels where they can again cover at current levels. The cycle keeps repeating itself over and over again both ways.
The winter origins of China purchase like Ethiopia, Nigeria , Sudan , Burkina , Mali etc are all rumored to have little stocks, the only origin where crop was harvested recently was Indian Summer crop , Tanzania and Mozambique.
Indian summer crop got cleaned up faster than it arrived as prices were attractive , Chinese buyers knew about certain quality and quantity problems with Tanzania/Mozambique and Indian exporters were eager for volumes. Worked well for both I would say , after a long long time we saw back to back business happening smoothly and with mutual benefit.
Talking about carry overs and stocks at other destinations I would assume there isn't much anywhere. In a dull market (Period of Jan'18-May-18) I doubt anyone was speculating on a big rush and was hoarding sesame. Yes there could be a few but thats definitely not a reflection of the whole market. Most people were back to back and now have a chance to sell at a fair price.
The Season ahead :-
Like I said above prices being high at Origin has its own advantage and disadvantage. The good thing is that goods at destination move faster the bad thing is that orders for the Origin slow down. Everyone wants to first book their profit , watch carefully and then enter. Everyone is looking for sweet deals.
India over the years has become a reluctant seller. Everyone wants to double their investments in 1 seasons cycle. This is the reason that even a increase of about 40% from the seasons low seems small to the stockiest.The Indian story starts and ends with less sowing more rainfall , sometimes I get a feeling that people here actually pray for less crop concentrating on profits to be made on their stocks rather than focusing on the bigger picture of world demand/supply.If you argue in India about a huge crop the chances are you will be countered negatively, strange but true.
The sowing as I have always maintained varies to a limited extent depending on farmers preference and commodity prices.Usually sesame sowing areas are not feasible for a variety of crops but the farmers as we know are amazing people , if they get to it they can do the impossible.In recent times we did see the Sesame sowing area stagnate or reduce due to better prices of pulses but with reversed trends we are hopeful that has changed this year.Sporadic rains continue to be a mystery as it can change the volumes drastically within weeks. Till last weeks the areas that were almost dry are now water logged , paddy and other Kharif crops have that advantage of late sowing and late harvest which sesame doesn't.Rarely have we seen Re-sowing of sesame once the initial sowing fails.
However I am hoping this year of a better harvest than previous years , putting a number right now would be shooting in the dark.
The carry overs as we discussed are at bare minimum , the carryovers give a physical hedge every year for forward trade as well as stabilizing the markets for sudden demands such as " Indian Domestic sales for Winters". The short bursts of demands are controlled and catered by stocks in hand, with nothing to fall back on the new crop 2018 will always be under pressure.
There is another Korean Tender rumored before September . A tender before new crop would for sure empty the exporters as unlike local stockiest they would not be carrying Natural Sesame stock into the new season. The would mean almost everyone would be in to cover stocks for new season from Day 1 .
The "Bengal Double Skin" Hulled which has been a controversial product over the years but has evolved beautifully to cover the "Low Priced" but "Good Looking Seed" markets with no real concern for food safety or taste will take a hit this season. The bengal crop was stated to be less by about 30% which means the excess quantity they had to offer to the hulling units is gone and their prices up. The oil industry had first rights to this double skin quality and it has started to show already with prices rising quickly. This means a lot of factories will shift back to white sesame raw material ,volumes could be as high as 40-50,000 MT Annually ,the low priced cargos will not be available readily means at destinations everyone to have level playing field.
By the time we finish this season and merge into the new 2018 crop we could be closer to levels not seen in a long time, low priced stocks at destinations would have finished and the markets adjusted to new levels. Most commodity traders would agree that when we switch the season on a higher level the price volatility is that much bigger but a crash is highly unlikely because that would mean the whole trade to loose money. Its alright if it happens the other way around when markets open at the bottom and remain their but a crash from high's to low's takes more than just demand to bring it down.
Slow demand at best can keep the markets stagnant or trigger small corrections but a overall bullish sentiment usually prevails , at-least until we reach the top line.
For the season ahead ,Top line in my estimate for good quality Natural Sesame 99/1/1 type is USD 1850-1950 PMT and USD 2400-2500 PMT for good quality Hulled Sesame . Bottom lines should be USD 1250-1350 PMT and USD 1650-1750 respectively.
Natural above $2000 and Hulled above $2500 is a possibility but the exit windows will be too narrow at any given time.
Factors for Top Line :-
1:- Low Stocks and empty warehouses.
2:- Relatively less new crops compared to previous years in India,China ,Myanmar & Africa.
3:- Good domestic demand in India.
4:- USD movements against currency of Exporting countries.
5:- Triggers like general bullish sentiments and stock situation at Chinese ports.
Factors for Bottom Line :-
1:- A relatively huge crop as compared to previous years at all origins.
2:- Less stocking due to high prices.
3:- Back to back business resulting in stagnant and spread consumption patterns.
4:- USD movements against currency of Exporting countries.
5:- Chinese port stocks replenished periodically or huge inventory built up.
To sum up we have a feeling it is going to be a good year both in terms of prices and movement of goods. The Sesame market has matured tremendously over the years , the supply/demand lines well identified.What goes where , who buys what , what is available when, are all chalked out. The smaller things can create nuisance for a while but in a larger prospective China remains the KING,Africa remains the volume supplier and India remains the trusted supplier of Hulled, Sortex Sesame , market information and Gossips.
Please feel free to comment/correct/share just refrain from passing this as your own report.Giving due credit is important.
Regards
Mukul Gupta
Director
Shakumbhri Expo Impo Ltd.
India.
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